8 SaaS pricing best practices with concrete examples

Sarah Goomar

We get it. Pricing your SaaS product means evaluating many changing variables — often at the same time. You have to ensure you’re able to deliver quality service while also keeping the bottom line in mind.

That's why we've made a list of 8 SaaS pricing best practices to grow your revenue. You can follow them to charge your customers more fairly and accurately.

Let’s jump right into it. 

1. Get to understand your customer base truly

As you know, successful SaaS pricing isn't about throwing darts blindfolded. It's about knowing your customers inside and out. 

To do this, dive into market research:

  • Identify pain points: What problems are your customers trying to solve?
  • Assess feature value: What specific aspects of your software are most important to them?
  • Determine willingness to pay: What's the maximum they're willing to invest to address their needs?

This last point is key. Understanding how much your customers are willing to pay is the cornerstone of effective pricing. It helps you find the "sweet spot" where your price tag matches the value your product brings to the table.

However, not all customers are the same.

Different segments have unique needs and budgets:

  • Small businesses might be focused on cost-effective solutions.
  • Enterprise customers might prioritize advanced features and top-tier support.

By segmenting your research, you'll understand how to price your product for maximum appeal and profitability.

Example: Salesforce's customer-centric approach

Salesforce is a prime example of a company that truly understands its customer base. They always gather customer feedback and do market research, which helps them adjust their pricing and features. 

This "customer 360" approach ensures that their pricing keeps pace with their customers' changing needs and that their billing system keeps pace with market trends.

Salesforce shows that listening to your customers can build lasting relationships and create a pricing model that truly reflects your software's value.

2. Offer multiple pricing tiers

One size rarely fits all in the world of SaaS. Your customers come with different needs and budgets. A smart move is to provide multiple pricing tiers to cater to these diverse segments.

This approach allows you to:

  • Appeal to different buyer personas. Craft packages that they relate to — create separate offerings for individual users, small teams, growing businesses, and large enterprises.
  • Maximize revenue. Offer options that appeal to both budget-conscious customers and those willing to pay a premium for added value.
  • Make upselling easier: Provide a natural progression for customers to upgrade as their needs evolve.

When designing your tiers, think carefully about the features and limitations of each. Each tier should offer increasing value to justify its price point. You could have more features, higher usage limits, priority support, or additional services.

Example: Slack's tiered approach

Slack, the popular communication platform, exemplifies this strategy. 

They offer a range of pricing tiers:

  • Free: For small teams or those wanting to try out the platform
  • Pro: For growing teams needing more features and storage
  • Business+: For larger organizations requiring enhanced security and compliance
  • Enterprise Grid: A customizable solution for massive enterprises with complex needs

By offering a variety of options, Slack ensures that teams of all sizes and budgets can find a plan that fits their needs. This approach attracts a wider audience and allows them to capture more revenue as growing teams upgrade to higher tiers.

3. Use a value-based pricing strategy

Forget about fixating on your costs or trying to match your competitors' prices. Instead, focus on what’s really important: The value your product delivers to your customers. This is the heart of value-based pricing.

This strategy shifts your mindset from cutting costs to boosting profits. Help customers genuinely understand the benefits your software offers. 

Think of it this way:

  • Value is subjective: Different customers will derive different levels of value from your product. Some might see it as a game-changer for their business, while others might find it helpful but not essential.
  • Research is key: To nail value-based pricing, you need to dig deep into your customers' experiences. What results have they achieved using your software? How has it impacted their business?
  • Price reflects value: Once you understand the value your customers gain, you can set prices that make sense to them. This tactic not only boosts your revenue but also strengthens customer loyalty.

Example: HubSpot's value-driven pricing

HubSpot, the renowned marketing and sales platform, is a champion of value-based pricing. Their pricing model isn't just about how much it costs them to provide the service; it's about the return on investment (ROI) their customers gain. The features are designed to address different customers' specific needs and goals.

Each of HubSpot's pricing tiers offers more value:

  • Free: Basic tools to get started
  • Starter: Additional features for growing businesses
  • Professional: Advanced features for scaling businesses
  • Enterprise: Tailored solutions for large organizations

This structure lets HubSpot charge extra for special features with the most significant impact. These services include marketing automation, lead nurturing, and sales analytics.

4. Implement a freemium model (at least temporarily)

Want to get potential customers hooked on your SaaS product? Consider a freemium model. This strategy offers a free version of your software with limited features or usage. 

It's like a "try before you buy" approach that allows users to experience the value of your product firsthand.

The goal is to attract users with the free version. Next, guide them to upgrade to a paid plan. As an example, the paid plan might unlock more features and higher usage limits, and upgrades also include premium support. This tactic is a powerful way to build a large user base and drive revenue growth.

A successful freemium model relies on finding the right balance:

  • Generous enough to attract: The free version should offer enough value to make it appealing to potential customers.
  • Limited enough to incentivize upgrades: Strategic limitations encourage users to upgrade for more benefits.
  • Clear upgrade path: Make it easy for users to understand the value proposition of each paid tier and how to upgrade.

Example: Evernote's freemium success

Evernote, a popular note-taking app, is a prime example of a well-executed freemium model. The free plan has basic features for individual users. A free account lets them capture and organize notes, make to-do lists, and sync across devices.

Still, Evernote limits the free plan's storage and advanced features, which include offline access, collaboration tools, and PDF annotation. 

Evernote’s pricing per feature creates a natural incentive for users. Those who need more storage or advanced features upgrade to one of their paid plans.

5. Consider usage-based pricing

Certain customers use certain SaaS products more heavily, such as cloud storage or email marketing tools. In these cases, usage-based pricing can be a fair and transparent way to charge customers.

With usage-based pricing, customers are charged based on how much they use your service. You can measure usage in terms of storage space consumed, emails sent, API requests made, or other relevant metrics.

Here are some of the benefits of usage-based pricing:

  • Fairness: Customers only pay for what they use, which can be more equitable than a flat-rate fee.
  • Transparency: The pricing model is clear and easy to understand.
  • Scalability: Customers can easily scale their usage up or down as their needs change.
  • Increased revenue: Usage-based pricing incentivizes customers to use your service more.

Example: Amazon Web Services' pay-as-you-go model

Amazon Web Services (AWS), the leading cloud computing platform, is an excellent example of a company that uses usage-based pricing. 

With AWS, customers only pay for the resources they use, such as compute power, storage, number of users, and bandwidth. Each service has different parameters, and your costs are calculated depending on the service type. This flexibility allows businesses to scale their cloud infrastructure up or down as their needs change without a fixed monthly fee.

6. Review and adapt your pricing regularly

Your SaaS pricing isn't set in stone. The market, your customers, and your competition are constantly changing. To stay ahead, you must constantly analyze and fine-tune your pricing strategy.

Think of it like tending a garden: You wouldn't plant your seeds and then walk away, expecting a bountiful harvest without any further effort. Similarly, your pricing strategy needs regular attention to flourish.

Here's what to watch for:

  • Customer feedback: Are customers happy with the value they're getting for the price? Are they asking for different features or pricing options?
  • Market changes: Is the market growing or shrinking? Are there new trends or technologies that could impact your pricing?
  • Competitive pressures: Are your competitors changing their prices? Are new competitors entering the market with disruptive pricing models?

By regularly reviewing these factors, you can keep your pricing competitive. This way, billing is aligned with customer expectations. Don't be afraid to experiment with different pricing models, strategies, and tactics. The key is to track your results and be willing to adapt.

Example: Netflix's dynamic pricing approach

Netflix, the streaming giant, is a master of adapting to change. 

They frequently adjust their plans and pricing based on factors like:

  • Regional market conditions: They consider factors like local income levels, currency exchange rates, and cultural preferences.
  • Competitive landscape: Netflix closely monitors their competitors' pricing and offerings.
  • Customer data: The company analyzes viewing patterns and subscription trends to track what their customers value.

7. Simplify your pricing structure

When it comes to pricing, clarity is key. Confusing prices can block customers. These complications stop them from understanding your value. 

If your prices are hard to grasp, customers might feel overwhelmed. Their frustration might push them to a competitor with a more simple approach.

To keep your pricing simple and customer-friendly:

  • Limit the number of tiers: Offer a few distinct options rather than a dizzying array of choices.
  • Use clear and concise language: Avoid jargon and industry-specific terms that customers might not understand.
  • Highlight key differences: Make it easy for customers to compare the features and benefits of each tier.
  • Use visual aids: Consider using tables, charts, or icons to represent your pricing structure visually.

Example: Zoom's direct pricing

Zoom, the video conferencing platform, is a model of pricing simplicity. Their pricing page offers a few clearly defined tiers, each with distinct features and a straightforward price point.

This layout makes it easy for customers to understand what they're getting for their money and choose the plan that best suits their needs. This clarity has undoubtedly contributed to Zoom's rapid growth and high conversion rates.

8. Communicate value clearly

Every pricing communication must be clear. This principle applies to your website, marketing materials, and sales conversations. Explain the benefits for customers at each price.

Show them how your software will make their lives easier. Share how it will also make their businesses more successful or their goals more achievable.

Here's how to effectively communicate value:

  • Focus on benefits, not features: Instead of simply listing features, explain how they help your customers.
  • Use customer testimonials and case studies: Show how other customers have benefited from your software.
  • Stress the ROI: If you can, measure the value your software gives in cost savings, higher productivity, or revenue growth.
  • Tailor your messaging to different customer segments: Speak directly to each target audience's pain points and goals.

Example: Asana's value-focused messaging

Asana, the project management platform, communicates value throughout its pricing page. 

Each tier highlights the specific benefits that cater to different needs:

  • Basic: For individuals or teams just getting started with project management
  • Premium: For teams that need to create project plans with timelines and dependencies
  • Business: For teams and companies that need to manage work across initiatives
  • Enterprise: For organizations managing work across teams with enhanced security and controls

Next steps to follow SaaS pricing best practices

Once you've crafted your ideal strategy, the next step is implementation. Setup can be daunting, especially with complex usage-based or hybrid models. Luckily, there's a solution that can take the weight off your shoulders.

Consider using a billing platform like Orb. 

Orb is made for the complexities of SaaS billing. We integrate SaaS pricing best practices for you, and then the Orb platform lets you focus on your core product and customer experience.

With Orb, you can:

  • Simplify complex billing: Orb handles the nuts and bolts of usage tracking, calculations, and invoicing, freeing you from the burden of manual spreadsheet-billing processes.
  • Use flexible pricing: Orb's platform allows you to easily create and adjust pricing tiers, discounts, and usage-based metrics. You can adapt quickly to market changes and customer feedback.
  • Integrate seamlessly: Orb integrates with your existing tools and workflows. This system sits on top of your data warehouse for a smooth transition to your new pricing model.

Learn more about how Orb can solve all of your B2B SaaS billing needs.

June 6, 2024
Best Practices

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